Correlation Between Air Busan and Shinsung Delta

Can any of the company-specific risk be diversified away by investing in both Air Busan and Shinsung Delta at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Air Busan and Shinsung Delta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Busan Co and Shinsung Delta Tech, you can compare the effects of market volatilities on Air Busan and Shinsung Delta and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Air Busan with a short position of Shinsung Delta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Busan and Shinsung Delta.

Diversification Opportunities for Air Busan and Shinsung Delta

0.5

Correlation Coefficient

Air Busan  Shinsung Delta

Very weak diversification

The 3 months correlation between Air and Shinsung is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Air Busan Co and Shinsung Delta Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsung Delta Tech and Air Busan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Air Busan Co are associated (or correlated) with Shinsung Delta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsung Delta Tech has no effect on the direction of Air Busan i.e., Air Busan and Shinsung Delta go up and down completely randomly.

Pair Corralation between Air Busan and Shinsung Delta

Assuming the 90 days trading horizon Air Busan is expected to generate 27.9 times less return on investment than Shinsung Delta. But when comparing it to its historical volatility, Air Busan Co is 2.98 times less risky than Shinsung Delta. It trades about 0.02 of its potential returns per unit of risk. Shinsung Delta Tech is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,610,000  in Shinsung Delta Tech on September 3, 2024 and sell it today you would earn a total of  1,930,000  from holding Shinsung Delta Tech or generate 41.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Air Busan Co  vs.  Shinsung Delta Tech

Air Busan

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Busan Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Air Busan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shinsung Delta Tech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsung Delta Tech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinsung Delta sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Busan and Shinsung Delta

The main advantage of trading using opposite Air Busan and Shinsung Delta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Busan position performs unexpectedly, Shinsung Delta can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shinsung Delta will offset losses from the drop in Shinsung Delta's long position.

The idea behind Air Busan Co and Shinsung Delta Tech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.